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- Ripple and SEC near settlement in landmark XRP case, proposing to dissolve an existing injunction and return $75M of $125M in penalties to Ripple.
- SEC Commissioner Caroline Crenshaw criticizes the deal, warning it weakens investor protections and undermines the agency’s enforcement authority.
- Crenshaw fears regulatory erosion, citing a broader trend of reduced crypto enforcement and the risk of a “regulatory vacuum.”
Ripple vs. SEC legal saga may be nearing its conclusion, but a top official at the U.S. Securities and Exchange Commission (SEC) is raising serious concerns about the terms of the proposed settlement. SEC Commissioner Caroline Crenshaw issued a scathing statement on May 8, warning that the deal could undermine the agency’s authority over the crypto industry and weaken long-standing investor protections.
The joint settlement, filed in a New York federal court by Ripple Labs and the SEC, requests the dissolution of the injunction placed on Ripple in August 2024. It also seeks to return $75 million of the $125 million in civil penalties held in escrow back to the crypto firm. This settlement would mark a significant step toward ending one of the most high-profile crypto enforcement cases in U.S. history.
However, Crenshaw, known for her skeptical stance on digital assets, blasted the agreement as a dangerous precedent. In her May 8 statement, she argued that the deal could erode public trust in the SEC’s enforcement capabilities and contradict previous legal victories.
“This settlement, alongside the programmatic disassembly of the SEC’s crypto enforcement program, does a tremendous disservice to the investing public and undermines the court’s role in interpreting our securities laws,” Crenshaw said.
Ripple Deal Sparks SEC Investor Protection Fears
The commissioner’s comments also reflect broader concerns about a shift in the SEC’s regulatory tone. Under the Biden administration and with growing political pressure to support innovation, the SEC has begun rolling back its aggressive enforcement posture established during former Chair Gary Gensler’s tenure. It includes quietly dropping several crypto-related cases, which Crenshaw views as detrimental to market integrity.
She warned that the Ripple settlement could “erase the investor protections we already won” and create a “regulatory vacuum” at a time when the market lacks clear rules for digital assets like XRP.
“The settlement is not in the best interests of the investors and markets that our agency is tasked with serving and protecting. It creates more questions than answers,” she emphasized.
The legal battle between Ripple and the SEC began in December 2020, when the agency accused Ripple of selling XRP as an unregistered security. In August 2024, Judge Analisa Torres ruled that Ripple’s XRP token did indeed violate securities laws when sold to institutional investors, resulting in a $125 million penalty and a court-ordered injunction.
Ripple SEC Deal Nears Final Approval
The current proposed settlement, if approved, would dissolve that injunction and return a majority of the penalty to Ripple. The authorities have not finalized the process. Former federal prosecutor James Filan noted in a May 8 analysis that the agreement still needs to clear multiple legal hurdles.
First, Judge Torres must provide an indicative ruling approving the settlement terms. If that occurs, the SEC and Ripple will seek a limited remand from the Second Circuit Court of Appeals to allow the lower court to finalize the agreement.
“After the injunction is dissolved and the funds distributed, the SEC and Ripple will ask the Court of Appeals to dismiss the SEC’s appeal and Ripple’s cross-appeal. Then it will be over,” Filan explained.
The Ripple case has become a bellwether for the future of crypto regulation in the United States. If the relevant authorities finalize this settlement, it could set a precedent for how they handle similar enforcement actions in the future. However, critics like Crenshaw argue that a premature or overly lenient settlement could hamper the SEC’s ability to enforce securities laws in the digital asset space.
With the crypto industry still lacking comprehensive regulation and the SEC’s crypto task force yet to finalize a clear framework, Crenshaw’s warning signals that the fight over crypto oversight is far from settled, even if the Ripple case is soon.
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